Chinese real estate brokerage KE Holdings conducts review of fraud allegations

SINGAPORE — China Real Estate Broker

KE Holdings Inc.

BEKE -3.82%

said on Friday that it would conduct an internal review of fraud allegations by a prominent U.S. short seller, and refuted the claims in the investment firm’s report.

Earlier in the day, Muddy Waters Capital LLC released a 77-page report on New York-listed KE Holdings, which operates an online platform popular in China that is used by many real estate agents, landlords and homeowners. , buyers and individuals looking to rent used apartments. The company charges a fee to assist with transactions involving new and old homes, and has a unit that provides real estate financing, home improvement and property management services. KE Holdings is known as Beike – the Chinese word for “seashell”.

Muddy Waters said they took a short position in the company, and drew similarities between Beike and

Coffee Luckin Inc.,

LKNCY -2.84%

Chinese coffee chain listed on Nasdaq before increase its reported revenue months before revealing a major accounting fraud.

The company, run by American short seller Carson Block, said it noticed differences in Beike’s reported trading volume, number of stores and dealers after conducting due diligence including “real interviews” site and site visits” and collect data from the broker’s platform. It accused the company of significantly inflating its commission revenue and business volume. Shares of Beike ended down 2% on Thursday after Muddy Waters released the report.

Beike said Friday that the Muddy Waters report is “null and full of factual errors, unsubstantiated claims, and misleading speculations and interpretations.” It added that the report “shows a fundamental lack of understanding of the housing transaction industry in China.” It went on to criticize Muddy Waters’ data collection, research and analysis methods on transaction volumes and its store and dealer verification efforts, and said it was largely based on data. whether incomplete.

The company also said that an independent audit committee had been authorized by the board of directors to conduct an “internal review of the material allegations contained in the Muddy Waters report, with support and advice from independent third-party advisors engaged by the audit committee”. and it will provide updates as appropriate.

Beike listed on the New York Stock Exchange in August 2020 after raising more than $2 billion in an initial public offering. Its market capitalization grew to more than $80 billion within months of the exchange’s launch, but has since dropped to around $22 billion.

The company’s supporters include

SoftBank Corporation Of Corp.

The Vision Fund, China’s Internet Giant

Tencent Holdings Ltd.

, and the private equity firm Hillhouse Capital Group. Last year, Beike reported a net profit of $113 million after years of losses, and said net sales jumped 53% to $11 billion.

In May of this year, Beike said its co-founder, chairman and controlling shareholder Zuo Hui had died of an illness it did not detail. The company’s CEO Peng Yongdong later assumed the role of chairman.

The company’s trading volume — and share price — has fallen this year amid broader property sales triggered in part by financial problems in the US.

China Evergrande Group

and other major developers. In the first nine months of this year, Beike said its revenue fell 12% year-on-year in 2020. The company says it has nearly 50,000 stores in operation, up 20% from a year ago, and 468,014 agents active as of September 30.

The world’s most indebted real estate company Evergrande has embarked on a social media campaign to show construction has resumed and says it is doing whatever it takes to deliver homes. The WSJ compares these posts to those of upset buyers. Photo Collection: Emily Siu

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